Fri. Jan 21st, 2022

Toshiba’s plan to break up into three companies faces early derailment after one of its biggest investors demanded an extraordinary meeting to vote on the split and revive talks with potential buyers to take the entire conglomerate private .

The request for the EGM was delivered to Toshiba on Thursday by Singapore-based fund 3D Investment Partners, its second-largest investor with a 7.6 percent stake, which set the Japanese conglomerate on course for another potential bruising collision with activist shareholders.

The GDP request is structured in such a way that shareholders directly proposed three-way distribution, a plan that several of the company’s largest investors refused to accept as a legal option.

Toshiba’s plan will divide the group into three separately listed companies: a device company; an infrastructure business; and a holding company that will handle its interests in semiconductors and memory chips.

The friction with shareholders arose from the conclusions of a strategic review committee that was Toshiba forced to create last year by investors who demanded that the 140-year-old group consider a range of options to revive its fortune.

In November, the SRC recommended the split, arguing that it had not received convincing indications of a buyout offer. But shareholders said they believe at least two buyers have discussed valuations for a private option that were no less than 25 percent higher than Toshiba’s share price in December.

Since Toshiba’s management supported the separation plan, 3D and other major shareholders have become increasingly frustrated that the company did not intend to give investors a direct mechanism to vote on the proposal.

They are also concerned that Toshiba has not clarified when or on what terms it will convene its own promised EJV, on which the proposal will be discussed.

Shareholders who collectively hold more than 30 percent of Toshiba’s shares told the Financial Times last month that they would vote against the distribution if the option is given. The plan will require the support of a two-thirds majority of shareholders, but the vote will not take place for two years.

3D’s main proposal will give shareholders an immediate facility to vote against the plan, which will require Toshiba’s articles of association to be amended to implement the division recommended by the SRC and approved by the board.

If the ranks of the opposition reach more than one-third of shareholder votes, Toshiba will be forced to admit that it is following a plan that does not have the necessary support.

3D said he would vote against this proposal.

But a second proposal by 3D calls on the SRC to continue its review and become actively involved in discussions about a private transaction or minority investment in the company.

“3D is seriously concerned that the strategic review process leading up to the separation plan was inadequate because it did not consider a full range of alternatives,” the fund said.

Toshiba said: “It is true that we received a letter from 3D and are currently investigating it.”

Other investors in Toshiba have said that an EGM request at this stage is likely to serve mostly as a negotiation tactic. The company’s management already suffered defeat in the hands of its shareholders in 2021, and is reluctant to risk a repeat of the experience if compromises are to be made, executives at two other Toshiba shareholders said.

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